Survey finds Malta’s attractiveness to foreign investors declines 40% in last two years

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The annual attractiveness survey carried out by EY Malta revealed that the number of investors who find the country attractive from a business viewpoint collapsed by 25% compared to last year.

The percentage of respondents viewing Malta as attractive has declined for a second year in a row. Malta is now viewed as attractive for FDI by 37% of investors, while 46% believe it is not attractive. This is a significant decrease compared to 2020, when 62% of investors viewed Malta as attractive, and 25% believe that the country was not attractive.

This decline in FDI attractiveness means that over the last two years, 40% of respondents shifted from the “yes” replies to the “no” or “don’t know.” When compared with previous years’ scoreboards, with a few exceptions, Malta has faced a general reduction in attractiveness across all FDI parameters.

As in previous years, corporate taxation remained top of the attractiveness scoreboard; however, it has witnessed a 15%
decline in one year. The attractiveness of Malta’s stability of social climate (58%) has decreased by 6% and remains in third place, while the telecommunications infrastructure (64%) has retained second place.

For the second year running, the stability and transparency of the legal, political and regulatory environment is in last
place on the FDI attractiveness scoreboard, with only 17% of current foreign investors deeming this parameter to be currently attractive and 64% not attractive. Perception of Malta’s transport and logistics attractiveness, previously considered Malta’s least attractive FDI parameter, has again improved slightly, and is now seen as attractive by 28% of investors.

A large majority believe grey listing will mainly lead to reputational damage, and most believe it will make doing business in Malta more difficult. The clearest impact of the grey listing, according to respondents, will be on Malta’s ability to be seen as a
reputable destination to conduct business (84%). This is followed by the ease of doing business in Malta for their
companies (55%) and their future investment decisions (42%).

Among the most common factors listed by respondents on how Malta can become more attractive, reputation, governance, improving the skills base and tackling the grey listing were mentioned as priorities. On the positive side, survey participants listed the benefits of Malta’s attractive corporate tax regime, an English-speaking workforce and competitive labour costs.

The clearest impact of the grey listing, according to respondents, will be on Malta’s ability to be seen as a reputable destination to conduct business (84%). This is followed by the ease of doing business in Malta for their companies (55%) and their future investment decisions (42%).

Despite grey-listing, 77% of companies still believe their long-term future is in Malta, although there is a slight increase in “no” responses. The last two years have seen only a marginal decline of 3% (from 80% in 2019) in positive responses, although the number of negative responses has increased from 2% in 2019 to 8% in 2020 and 15% this year. Respondents continue to believe that to remain globally competitive Malta’s utmost priority should be a focus on reputation and brand, as well as education and skills. The strengthening of the country’s’ institutions, enforcement and monitoring is also important for many respondents, ranking in third place, followed closely by the development of new economic sectors.

A large majority (80%) believe environmental sustainability is a critical or somewhat important part of their investment strategy. Companies are beginning to place greater emphasis on mitigating their effects on the environment, whether through environmental responsibility (70%), waste reduction (56%) or a reduction in carbon emissions (43%). Almost one third believe that environmental sustainability is critical for their investment strategies, and half believe it is somewhat important.

Introducing the report, EY Partner Ronald Attard called for a new economic model that is less based on numbers – be it the number of cars, tourists, permits or property sales. One that focuses more on well-being and the quality of life of our residents. An economic model where the benefits of an attractive tax system are eclipsed by the strength of our talent pool, digital infrastructure, innovation environment, quality of life and social fabric”.

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